Deborah Mary Sophia and Casey Hall
(Reuters) – Alibaba Group Holding Ltd said on Thursday its first-quarter sales missed expectations, as its domestic e-commerce sales were weighed down by cautious spending by Chinese consumers due to the weak economic situation.
In China, a sluggish economic recovery, combined with a persistently weak real estate market and rising employment insecurity, is eroding consumer confidence and purchasing power in the world’s second-largest economy, dealing a blow to global business across the board.
Alibaba is also battling stiff competition from rivals including discount-focused retail platforms such as JD.com, PDD Holdings Ltd.’s Pinduoduo and ByteDance-owned Douyin.
Alibaba reported sales of 243.24 billion yuan ($33.98 billion) for the quarter ended June 30, beating analysts’ average estimate of 249.05 billion yuan, according to LSEG data.
Revenue from the company’s domestic e-commerce division fell 1% despite double-digit order growth driven by increased numbers of shoppers and purchasing frequency.
China’s e-commerce giants are being forced to rely on deep discounts and promotions to lure shoppers, squeezing profits across the retail industry.
“Weak consumption in China is real. Consumers are spending less, buying less and being more rational,” said Vinci Zhang, an analyst at M Science. “So Alibaba and JD.com are likely to continue to face challenges in the second half of the year.”
China’s massive mid-year e-commerce sales in June saw their first ever decline in sales, despite efforts by major platforms to run sales over extended periods, according to third-party estimates.
Alibaba’s U.S.-listed shares rose about 2% at the open on Thursday, reversing a previous day’s decline, after its quarterly profit beat market expectations.
Alibaba executives claim that increased purchasing and the introduction of new tools for retailers will drive advertising and customer management revenue to the platform in the future.
On a conference call with analysts on Thursday, executives reiterated their hopes that new monetization tools will boost revenue growth in the second half of the year.
Alibaba Group Chief Executive Eddie Wu said a priority for its domestic e-commerce units, Taobao and Tmall Group, is to improve the user experience to boost gross merchandise volume (GMV), a measure of sales.
“Once our market share stabilizes, we can shift our focus to monetization,” he said.
Alibaba announced the biggest restructuring in its history in March 2023, splitting into six business units and focusing on its core businesses, including domestic e-commerce.
The story continues
Revenue from Alibaba’s international e-commerce division rose 32 percent to 29.3 billion yuan, helped by investments to expand its global presence and rising global demand for low-cost Chinese-made goods.
Alibaba’s cloud unit saw revenue rise 6% to 26.55 billion yuan, accelerating from a 3% increase in the previous quarter, thanks to growing public cloud adoption and strong demand for AI-related products.
The company has been moving to cut back on low-margin project-based contracts and says the growing scale of its cloud infrastructure has helped lower prices across its cloud products.
Net income attributable to ordinary shareholders in the first quarter was 24.27 billion yuan, down from 34.33 billion yuan in the same period last year.
(1 dollar = 7.1584 Chinese yuan)
(Reporting by Deborah Sophia in Bengaluru and Casey Hall in Shanghai; Editing by Sreeraj Kaluvilla and Kirsten Donovan)
